Our website uses cookies to enhance the visitor experience (what's a cookieCookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.). Are you happy for us to use cookies during your visits?
Please note: continuing without making a choice equates to giving us your consent, which you can withdraw at any time via our cookies policy page.

Losses on Property Lets

Newsletter issue - November 08.

In these turbulent times, losses on property lets may be increasing, so it's worth taking a look at how those losses are treated for tax purposes, to help get tax relief for any losses.

Where property is held in your own name
If you let a property you own personally, even it was previously your own home, you must report the rental income and expenses on your tax return. This applies whether you make a profit or loss from the letting.

Where you own several let properties all of the income and expenses relating to your UK properties are thrown into the same pot to establish the overall profit or loss for the year. Properties which are located outside of the UK are excluded from this property pot, as are properties which are let as furnished holiday homes on short lets. The profits and losses from overseas properties must be shown on the foreign income pages of your tax return. Furnished holiday lettings have special rules for dealing with losses and have some advantages.

It is important to declare the loss, if that is the result from the general property pot. Although you can't set that loss against your other income, it can be carried forward without time limit. If you do make a profit from letting your properties in a future year the loss you have made this year will reduce the tax you have to pay in that future period. If you don't claim the loss you won't be able to use it in the future.

Where property is held through a company
Where you hold let properties through a company the mechanism for calculating the profit or loss from the lettings is rather different. The interest paid on any borrowings taken by the company to fund the properties is not deducted directly from the rents, but it is treated as a separate expense.

The rental income from all the properties the company owns is set against the costs relating to those properties, excluding interest paid. Only at that stage is the interest payment set-off against all of the company's profits for the year. If those profits do not cover the whole of the interest paid, the excess interest cost is carried forward to the next year. The carried forward interest can only be set against the company's non-trading profits, such as from property or interest received. This means that it is not easy to get tax relief for excess interest where the borrowing relates to let property.

  • Auto enrolment icon

    Auto Enrolment

    Workplace pensions rules are changing.
    Be prepared for auto enrolment, see how we
    can help and read up on our guidance notes.

    More

  • Cloud accounting icon

    Cloud Accounting

    With our online bookkeeping packages, our support
    services are only a click away.
    Discover cloud accountancy solutions to bring your finances up to date.
    More

  • Pay less tax icon

    Pay Less Tax

    Our experienced tax advisors can help you
    make the most of your options to reduce
    your tax bills.

    More

  • Make more profit icon

    Make More Profit

    From business plans to management accounts,
    our business services will ensure you are in
    control of your business finances.

    More

  • Source finance icon

    Source Finance

    Our experienced partners can guide you
    in getting the finance you need to make
    your business grow. Read our guides or
    contact us for a free consultation.
    More

  • Outsource your payroll icon

    Outsource Your Payroll

    Let us handle payroll compliance for your
    business. We can deal with HMRC on your
    behalf, and take the stress out of RTI.

    More